VAT - SAP review

Business Challenge

During a SAP review for VAT and GST we will verify the proper working of the implemented VAT configuration. This will provide understanding of how changes in the business model, master data or legislation will have an impact on the implemented VAT configuration.

A SAP review will highlight where the VAT configuration could be improved or if additional control measures should be added to the business’s Tax Control Framework. The VAT review can also identify where errors occurs and there are increased risks allowing a more focused data analysis to take place.

After the quantification and evaluation of the risks and errors, these are assigned a risk profile for further testing of risk tolerance. In practice often the best way, with respect to testing an effective control framework, is to limit the initial scope of the review and focus on the top 3-5 indirect tax risks that exceed the company’s indirect tax appetite. These risks may include:

Inter-company transactions

Cross-border transactions

Correct deduction of input VAT (VAT paid)

Once these key risks have been analyzed a more detailed and focused scope can developed. Examples of possible VAT errors encountered in SAP include:

Ineffective use of the proper partner functions in SAP for a supplier who provides services in multiple countries and invoices VAT locally. This can result in the standard VAT calculation generating incorrect results.

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